Working Paper: CEPR ID: DP11449
Authors: Jacques-François Thisse; Philip Ushchev
Abstract: We provide a selective survey of what has been accomplished under the heading of monopolistic competition in industrial organization and other economic fields. Among other things, we argue that monopolistic competition is a market structure in its own right, which encompasses a much broader set-up than the celebrated constant elasticity of substitution (CES) model. Although oligopolistic and monopolistic competition compete for adherents within the economics profession, we show that this dichotomy is, to a large extend, unwarranted.
Keywords: Monopolistic Competition; Oligopoly; Product Differentiation; The Negligibility Hypothesis
JEL Codes: D43; L11; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monopolistic competition (L12) | market outcomes (P42) |
| number of firms increases (D21) | strategic interactions among firms diminish (D43) |
| strategic interactions diminish (C72) | firms retain market power (L11) |
| negligibility hypothesis (G41) | firms treat market as given (L10) |
| firms treat market as given (L10) | market behavior akin to monopolistic competition (D43) |
| product differentiation (L15) | influence on competition and market outcomes (L13) |